Bell Company, a manufacturer of audio systems, started its production in October 2014. For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey of audio system markets, Bell decided to turn its retail store into an audio equipment factory. Raw materials cost for an audio system will total $75 per unit. Workers on the production lines are on average paid $14 per hour. An audio system usually takes 6 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $5,008 per month. Indirect materials cost $6 per system. A supervisor was hired to oversee production; her monthly salary is $3,455. Factory janitorial costs are $2,164 monthly. Advertising costs for the audio system will be $9,292 per month. The factory building depreciation expense is $6,384 per year. Property taxes on the factory building will be $8,472 per year. Assuming that Bell manufactures, on average, 1,598 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns. Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Raw materials (1) $ $ $ $ Wages for workers (2) Rent on equipment Indirect materials (3) Factory supervisor’s salary Janitorial costs Advertising Depreciation on factory building (4) Property taxes on factory building (5) $ $ $ $ ECON 201 Answer Sheet 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. Short answer questions: 41. 42. 43. 44. 45. Total: Final Exam ECON 201 OL1-US1 Fall 2013 Weight of each multiple choice questions is 2 points. Weight of each short answer question is 4 points. Totally 100 points. Name___________________________________ I. MULTIPLE CHOICE (40 questions 2 points each). Choose the one alternative that best completes the statement or answers the question. 1) Economics is best defined as the study of: 1) _______ A) inflation, unemployment, and economic growth. B) financial decision-making. C) choices made by people faced with scarcity. D) how consumers make purchasing decisions. 2) Scarcity can best be defined as a situation in which: 2) _______ A) there are not enough goods to satisfy all of the buyers demands. B) there is more than enough money to satisfy consumers wants. C) resources are limited in quantity and can be used in different ways. D) there are no buyers willing to purchase what sellers have produced. 3) Printing presses, forklifts and assembly plants are examples of which factor of production? 3) _______ A) entrepreneurship B) physical capital C) human capital D) labor 4) Consumption Expenditures can be broken down into three categories: 4) ____ ...

1. Bell Company, a manufacturer of audio systems, started its
production in October 2014. For the preceding 3 years, Bell had
been a retailer of audio systems. After a thorough survey of
audio system markets, Bell decided to turn its retail store into
an audio equipment factory.
Raw materials cost for an audio system will total $75 per unit.
Workers on the production lines are on average paid $14 per
hour. An audio system usually takes 6 hours to complete. In
addition, the rent on the equipment used to assemble audio
systems amounts to $5,008 per month. Indirect materials cost $6
per system. A supervisor was hired to oversee production; her
monthly salary is $3,455.
Factory janitorial costs are $2,164 monthly. Advertising costs
for the audio system will be $9,292 per month. The factory
building depreciation expense is $6,384 per year. Property taxes
on the factory building will be $8,472 per year.
Assuming that Bell manufactures, on average, 1,598 audio
systems per month, enter each cost item on your answer sheet,
placing the dollar amount per month under the appropriate
headings. Total the dollar amounts in each of the columns.
Product Costs
Cost Item
Direct
Materials
Direct

2. Labor
Manufacturing
Overhead
Period
Costs
Raw materials (1)
$
$
$
$
Wages for workers (2)
Rent on equipment

3. Indirect materials (3)
Factory supervisor’s salary
Janitorial costs
Advertising

4. Depreciation on factory building (4)
Property taxes on factory building (5)
$
$
$
$
ECON 201 Answer Sheet
1.
2.
3.
4.
5.

5. 6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
Short answer questions:

6. 41.
42.
43.
44.
45.
Total:
Final Exam ECON 201 OL1-US1 Fall 2013
Weight of each multiple choice questions is 2 points. Weight of
each short answer question is 4 points. Totally 100
points.
Name___________________________________
I. MULTIPLE CHOICE (40 questions 2 points each). Choose
the one alternative that best
completes the statement or answers the question.
1) Economics is best defined as the study of: 1) _______
A) inflation, unemployment, and economic growth.
B) financial decision-making.

7. C) choices made by people faced with scarcity.
D) how consumers make purchasing decisions.
2) Scarcity can best be defined as a situation in which: 2)
_______
A) there are not enough goods to satisfy all of the buyers
demands.
B) there is more than enough money to satisfy consumers wants.
C) resources are limited in quantity and can be used in different
ways.
D) there are no buyers willing to purchase what sellers have
produced.
3) Printing presses, forklifts and assembly plants are examples
of which factor of production? 3) _______
A) entrepreneurship B) physical capital
C) human capital D) labor
4) Consumption Expenditures can be broken down into three
categories: 4) _______
A) durable goods, nondurable goods and services.
B) luxury goods, normal goods and inferior goods.
C) land, labor and capital.

8. D) food, shelter and appliances.
5) Based on statistics on unemployment, which group of
workers experience the highest unemployment rates? 5)
_______
A) White, 16-19 years old B) African American, 16-19 years old
C) unmarried men D) women maintaining families
6) Of the four countries with the highest level of GNP per
capita (the United States, Japan, Italy, and the United
Kingdom), during the 1960-2008 period, the fastest growing
country was: 6) _______
A) Japan. B) the United States.
C) the United Kingdom. D) Italy.
7) In growth accounting, the three sources of growth for a
country are capital, labor and: 7) _______
A) natural resources. B) technological progress.
C) trade. D) land.

9. 8) Which of the following is not considered investment in
human capital? 8) _______
A) the government expands its programs to improve health care
B) the government increases the level of unemployment benefits
C) a firm engages in on-the-job training
D) an individual decides to enroll in a vocational training
program
9) Which of the following is not considered a fiscal policy? 9)
_______
A) the 2001 economic stimulus package in 2001
B) the Troubled Assets Relief Program (TARP) in 2008
C) the $787 billion economic stimulus package in 2009
D) All of the above are fiscal policies.
10) A "bank run" occurs when panicky depositors
simultaneously: 10) ______
A) deposit their funds in a bank offering high deposit interest
rates.
B) withdraw their funds in order to invest in Treasury bills.
C) chase a bank owner who has fled the country.

10. D) withdraw their funds from a bank they believe will fail.
11) The Federal Reserve System: 11) ______
A) is different than the central bank of the United States.
B) includes 12 district federal reserve banks.
C) is a private profit-making commercial banking system.
D) implements fiscal policy.
12) The Fed's management of public expectations is sometimes
hindered by its own: 12) ______
A) difficulty in communicating the direction of future policy
actions.
B) inside lags.
C) internal disagreements about the course of future monetary
policy.
D) inability to conduct effective open market operations.
13) When Bob receives a 5 percent nominal wage increase in a
period where inflation is also 5 percent, then we say that he
experiences no money illusion when: 13) ______
A) he believes that his real wage decreased.

11. B) when he believes that his real wage did not change.
C) he believes that his real wage increased.
D) All of the above are correct.
14) Which of the following is a factor that economists have
identified that can shift the natural rate of unemployment?
14) ______
A) changes in labor productivity B) institutional changes
C) changes in demographics D) All of the above are correct.
15) An economic model is 15) ______
A) a simplified representation of an economic environment.
B) a small but completely working economy.
C) any graph.
D) all of the above.
16) Microeconomic analysis can be used to: 16) ______
A) evaluate the merits of public policies. B) better understand
how markets work.

12. C) make personal or managerial decisions. D) All of the above
are correct.
17) Suppose that the CPI in 2000 was 102 and the CPI in 2001
was 104. The rate of inflation between 2000 and 2001 was:
17) ______
A) 2.24%. B) 4.22%. C) 1.96%. D) 2.42%.
18) Zambia, a country in Africa, experienced an average GNP
per capita growth rate of -0.83 percent between 1960 and
2008. Based on this information, which of the following is true?
18) ______
A) GNP per person in 1960 is higher than in 2008.
B) GNP per person in 1960 is lower than in 2008.
C) Population in 1960 is higher than in 2008.
D) GNP in 1960 is higher than in 2008.
19) A decrease in government purchases shifts the ________
curve to the ________ . 19) ______
A) aggregate demand; right B) aggregate supply; right
C) aggregate demand; left D) aggregate supply; left

13. 20) In the long run, output is determined by: 20) ______
A) the size of the capital stock. B) the state of technology.
C) the size of the labor force. D) all of the above.
21) Which of the following will cause output to increase in the
long-run? 21) ______
A) an increase in income taxes
B) a decrease in government spending
C) a decrease in the money supply
D) None of the above will increase output in the long run.
22) Federal spending consists of: 22) ______
A) discretionary federal spending and debt payments.
B) federal government purchases and transfer payments.
C) defense and social security programs.
D) discretionary and mandatory spending.
23) Federal discretionary spending consists of: 23) ______
A) all the programs authorized by Congress on an annual basis.

14. B) interest payments on government debt held by the public.
C) all the spending that Congress authorized by prior laws.
D) all of the above
24) Which of the following is not true? 24) ______
A) The selling of government securities to pay for a deficit
spurs private investment spending.
B) Tax revenues move in the same direction as the business
cycle.
C) Expenditures on transfer payments move in the opposite
direction of the business cycle.
D) The federal budget deficit works as a sort of automatic
economic stabilizer.
25) The formula for the tax multiplier is: 25) ______
A) -MPS/MPC. B) -MPC/MPS. C) -1/MPS. D) MPS/MPC.
26) If an economy's marginal propensity to consume is 0.9 and
the marginal propensity to import is 0.1, then an increase
in government spending of $2,000 will increase income by: 26)
______

15. A) $10,000. B) $2,222. C) $20,000. D) $4,000.
27) When 7 of the 8 largest Japanese mortgage lenders in 1995
had gone bankrupt , which of the following events
prevented the collapse of these institutions? 27) ______
A) The decision of U.S. banks to make loans to the 7 bankrupt
institutions.
B) The government's decision to bail out all the 7 bankrupt
mortgage lenders.
C) The sudden rise in the home values in Japan.
D) The government's decision to let the surviving institution
buy out the 7 bankrupt institutions.
28) A monetary system in which gold backs up paper money is
called: 28) ______
A) the commodity standard. B) the silver standard.
C) the golden age. D) the gold standard.
29) If the government were to experience a budget surplus in
the next three years, the government's total debt would:
29) ______
A) stay the same over the next three years. B) increase over the

16. next three years.
C) would decrease only on the third year. D) decrease over the
next three years.
30) The decrease in investment caused by an increase in
government borrowing is called: 30) ______
A) monetizing the debt. B) the reshuffle effect.
C) Ricardian equivalence. D) crowding out.
31) An increase in the British interest rate relative to the U.S.
interest rate will cause a(n): 31) ______
A) depreciation of the dollar and a depreciation of the British
pound.
B) depreciation of the dollar and an appreciation of the British
pound.
C) appreciation of the dollar and a depreciation of the British
pound.
D) appreciation of the dollar and an appreciation of the British
pound.
32) Those who believe that wages adjust quickly to clear the
labor market also believe that: 32) ______
A) the AS curve is vertical. B) the AD curve is steep.
C) the AS curve is upward sloping. D) the AD curve is flat.

17. Recall Application 1, "Falling Home Prices, the Wealth Effect,
and Decreased Consumer Spending," to answer the
following questions:
33) According to the application, from 1997-2006, the largest
increase in net wealth for most families in the US came from:
33) ______
A) home equity. B) bankruptcy.
C) credit card debt. D) auto loans.
Recall Application 3, "How the U.S. Economy has Coped with
Oil Price Fluctuations," to answer the following
questions:
34) According to the application, surge in the price of oil was
caused by the increase in the demand for oil by fast growing
countries such as: 34) ______
A) Japan and China. B) Mexico and Iceland.
C) the U.S. and Japan. D) India and China.

18. Figure 15.1
35) Refer to Figure 15.1. If the wage rate can easily adjust to
clear the market, then if the wage rate is currently at $12:
35) ______
A) the wage rate will decline to eliminate the surplus.
B) the wage rate will decline to eliminate the shortage.
C) the wage rate will increase to eliminate the shortage.
D) the wage rate will decline to eliminate the shortage.
Table 5.1
36) Refer to Table 5.1. Assume that this economy produces only
two goods: Good X and Good Y. The value for this
economy's nominal GDP in year 1: 36) ______
A) is $110.
B) is $200.

19. C) is $146.
D) cannot be determined from this information.
37) Refer to Table 5.1. Assume that this economy produces only
two goods: Good X and Good Y. If year 1 is the base year,
the value for this economy's real GDP in year 2 is: 37) ______
A) $146. B) $176.
C) $120. D) none of the above
Table 5.3
38) Refer to Table 5.3. Suppose this economy produces only the
two goods X and Y. Nominal GDP in year 3 is: 38)
______
A) $510. B) $404. C) $208. D) $350.
Table 6.1

20. 39) Refer to Table 6.1. The unemployment rate is: 39) ______
A) 18.5%. B) 9.09%. C) 15.2%. D) 22.7%.
Table 6.11
40) Refer to Table 6.11. If 1999 is the base year, the price index
in 1999 is: 40) ______
A) 100. B) 1998. C) 121.7. D) 138.7.
II. SHORT ANSWER. (5 questions 4 points each). Write the
paragraph that best completes each statement
or answers the question.
41) Explain the reasons why the US had a budget surplus in the
late 1990s. 41) _____________
42) Explain how a budget deficit can lead to inflation. 42)
_____________
43) Explain how the U.S. recession in 2007-2009 affected the
demand for money. Be sure to specify which demand for
money decreases. 43) _____________

21. 44) List the two ways in which the national debt can place a
burden on future generations. 44) _____________
45) Illustrate examples of the countercyclical effects of the
automatic stabilizers. 45) _____________